Cost of goods sold (COGS)
If the product cost is unknown, Better Reports cannot compute COGS. In such cases, the built-in formula assumes that COGS is equal to Net Sales, resulting in a 0% margin. As a consequence, your COGS is overstated and your gross margin is understated. This is an arbitrary choice, used as a conservative measure. You could easily create your own COGS and Gross Margin measures to achieve a different outcome. For example, your formula might assume that, if the product cost is unknown, the gross margin should be set to 10% arbitrarily.
A cost of $0 is not the same as an unspecified cost. A cost of $0 means your COGS is $0 and therefore your gross margin is 100%. This is often the case for digital products (an eBook for example).